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tv   Fast Money  CNBC  September 2, 2009 12:00am-1:00am EDT

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close below 970 gets us to 905. >> when you look at a market that had the kind of data we had this morning in ism and isms around the world, china, pmi, the strength in the underlying economy, the market to do this on a heavy volume day, last week of the summer and actually we had a lot of people trading and a lot of people putting out protection, that underscores this move and tells you this was more than a low volume day, this was a big volume day and i think it's not the end like guy says. >> i don't remember the name of the movie, i'm sure guy adami says, when gwyneth paltrow says to michael douglas, that's not happiness. what was that movie? >> that was a good movie. that was like he whacks her in that movie. >> you know what? september came. that's not happiness to see me. you would expect to see on september 1st asset allocation. didn't get that ism number. we spoke last night. you're looking at a market right now that no matter what the good news is it cannot rally. that tells you the market needs to pull back. >> the market's a little tired right now. we had that big run-up, getting up toward 1030 then suddenly it seemed like they pulled the rug out from under us, the volatility index has been going 24 to 28. we closed at 29. weak close. and i will say to tim's point, 18 million contracts in the
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options world today. so there was support there when you're talking about volume. a majority of that option volume really going in the financials as well as the xlf, the etf for the financials. so this was a commitment on the financial side. that was what led the sell-off as we started to push lower early. >> let's go deeper into that story. the big story was wells fargo. pete, you were noticing some really unusual heavy put volume on wells during the session. exactly when we saw the market start to really tail off at around noon time. >> and at wells fargo we've had this kind of activity in recent past. over the last couple of weeks we've seen those option players come in there. that stock has had its performance and then its pullbacks and then it starts to sputter and pulls back. about 140,000 puts had traded against only 30,000 calls early when we did that at the halftime. we finished up the day 220,000 puts but 115,000 calls. so instead of a 4-1 ratio now you're back to a 2-1 ratio. so it looked like a lot of call buyers started to come in late in the day. a little bit of a paring off, so to speak, as wells fargo started
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going to the down side. >> the financial sector is the sector that took us higher. it is going to be the sector that tells you where the market is going. look at the best of breed names, see how they perform today. cme group, that's a tell on the capital markets itself. that came out early, there was a lot of selling pressure. we talked about goldman sachs. jon najarian spoke about it on the desk last night. that was your -- >> canary in the coalmine. >> canary in the coalmine. clearly, goldman sachs came out, tried to get above 166, couldn't, rolled over throughout the day. i actually bought some puts in goldman sachs. and that actually might be the best hedge against the market going lower. everyone talks about what would it be, the dollar or how do you play it with the yen. it might actually be with the best stock actually is goldman sachs. that will tell you where the market's going. >> and to joe's point, wells fargo, again, was a classic example of why this market doesn't look like it's in a great place. the ceo at the end of the day pointed out on tv that these guys were going to repay their tarp and they were going to do it in a shareholder-friendly way, that they weren't going to issue new capital. market rallies five points, then gives it all back, and it just tells you where we are here.
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i think you can put that along with the cit talk this morning that they were going to miss an interest payment. people are concerned about the credit quality. cit followed an 8k, which for you folks out there an 8k basically is something they have to file with the s.e.c. if there is a material event that they need to discuss. >> it seems like jon's maybe painting himself into a corner here. >> big-time. >> by saying at this point in time they do not need to have a special offering in order to pay back the tarp. >> didn't we hear the same comments months and months ago out of a number of people -- >> famous last words. >> frankly where there's smoke there's fire. we've talked about being short wells. i still think it has a shot to trade down to 24 if not lower. but i think wells fargo on the short side still sets up very well. >> you're skeptical, too, pete, aren't you? >> absolutely. to play along with what guy's talking about, where there's smoke there's fire, we have seen time and time again this put buying in wells fargo. now, the stock pulls back, then it starts to get elevated with the rest of the market. but it makes sense. wouldn't you think right now wouldn't be such a bad time for some of these secondary from any
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of these financials? forget wells fargo for the moment. any of the financials that might need to raise a little capital after the run they've had. this is the great opportunity in front of them to start raising capital once again. >> absolutely. >> i was just going to say, i think the question with wells fargo, though, it ends some of the rest of the market today, was that put activity more defensive, is it nervous longs or is it really people that know something or people that at least are carrying out a fundamental view? i think it's a lot of nervous longs out there, and i do think looking back at the market that around 950 we've got a big floor under this market but i think people are looking at the calendar. >> but the smart money, the smart nervous longs have been pieg these puts when the volatility was far lower. >> they paid up. you're right. >> volatility has been extremely low in wells fargo. you could have bought puts in wells fargo, goldman sachs, morgan stanley a few days ago on the low end of the volatility scale. we've been pounding the desk every night look at the volatility, it's at multimonth lows buy it, now today i looked at the volatility, it went up in
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september from 50 to 65. i mean, that's a dramatic move in volatility in that stock today. >> i think the critical question in the entire financial sector was today's move about a fundamental change or was it just more than a technical sell-off? and i do believe it was just a technical sell-off. if you look at the consumer banking names, you are not seeing any further deterioration in the consumer credit quality. so i think going forward longer-term the fundamentals are still supportive in the financial sector. this was just about technical selling. >> the psychology, though, of the market. robert shiller wrote in the sunday business section i think or it was the op-ed section about not happiness but essentially the optimism is on tajs on wall street. and here the panic is contagious as well. if the fdic is talking about a long laundry list of troubled banks, more than 400 banks and maria had mentioned at the end of her program just now that there was chatter on the street moving some of these banks as well, concerns about further bank failures -- >> i think epidemic was the word she used. >> yeah. >> but frankly, we've talked about this as well, the more bad banks coming out, we talked about that about a week and a half ago -- >> it doesn't matter what the
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fundamentals were -- >> well, until people get -- everybody gets scared again. then it's everybody back it n. to pull another way. it becomes the herd mentality, and i think we're on the verge of it frankly. i don't think the fundamentals set up as well as everybody would like to think they set up. yeah, i understand the yield curve, but banks need to lend in order for them to make money and until they start doing that frankly they don't have the earnings power everybody thinks they have. >> answer your question we're going to get further information on the fundamentals this frip unemployment is going to be huge particularly where the market sits right now. >> we got that great ism number today and we still sold off. >> yes. because if you look at unemployment that is the one economic figure you that really have not seen the up side to -- >> that was the part of the ism that people pointed to and said it still looks pretty weak. also across europe huh great manufacturing numbers and people also looked at unemployment in germany which is their largest economy that was weaker. >> let's move on and talk about the names -- aig, fannie, freddie selling off big today. second day in a row. "barron's" of course over the weekend had that negative article on aig which accelerated the sell-off in yesterday's session. the interesting ancillary play,
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though, here for all this, because we talk about these trash names every single day and how heavy volume they are, is in some of the online brokerage firms, the retail brokerage firms. rich repet over at sandler o'neill had this note out today. he's saying the pace of trading last month remained unseasonably strong as august volume typically declines from july. we believe one factor driving isn't in retail trading was activity around low-priced stocks like citi, bank of america, as well as fannie mae. >> well, you just touched on it a minute ago when you're talking about fundamentals. talk about no fundamentals. look at fannie, look at freddie. e-trade, another one of these names. we talked about when you get moves, that's why it's still a trader's market. you get moves whether it's a single day, a couple of hours. but when options double in certain stocks, when you look at aig and the stock price goes up to 50-some-odd dollars, when most people on the street are telling you it's worth nothing, that tells you something. it tells you people are very aggressive, the average trade size in aig i believe somebody reported the other day was under 250 shares. so you're talking about definite rabid trading going on right now, not on fundamentals but they're jumping in this dash for
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trash. and if you look today, for instance, you look at a name like citi, it traded a million calls versus half a million puts. exactly the opposite of what you would expect. it's a down day. why wouldn't they outpace you in the puts? it's because all the people that have been trading understand calls. they bought their calls. then they're getting out of their calls. and that's what you're seeing right now. great example e-trade as well. >> we're trying to steer in the right direction in terms of financials as well. weeks ago when it was trading in the teens we said listen there's a shot this goes to 23. we saw it at 23, we saw it trade at 23 1/2, closer to 24. we also said take profits. today it trades 21. if you're not out you now find yourself in the what should i do camp. you don't want to be in that camp. you want to be in the get out, take profits at the level we talked about, i still think it moves lower from here, especially if the tape corrects. there will be another opportunity to buy that stock. >> on e trade, very quickly to the stockish there's been a lot of talk about citadel's position, there's been talk they have to divest a big part of that position, that was the
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reason the stock soared the day before. there's a 120 million hangover of shares they could be selling into the market if there's room. that's back on, there you go. >> we should note ameritrade gets an upgrade from bmo capital markets to an outperform. a lot of people are sniffing around this sector seeing some of the activity in august. moving on the next trade, oil once again down 3%. this after yesterday's 4% slide. joe, this absolutely makes sense here at this point. >> if you look at the commitment of traders report that came out the other day it highlights last year was all about a chase for performance, investors were running in, snatching up oil contracts to the tune of the highest level. speculative length reached the highest level it has been at since january of this past year. one of the reasons we pulled back to the $75 level in oil. i still don't believe in going short oil right here. i think the trade you do is just scale out of positions you have on, whether i use weatherford, sun corps as possible names. another is copper. you look at copper, freeport-mcmoran down significantly today. again, i caution people there, don't necessarily buy into the short trade on that. if you look at the numbers
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today, production levels year on year out of chile and mexico, they were down. so when you look at oil and you look at copper, i don't know necessarily the theme is go short. >> and it tells you why this market is really trading more on the sentiment that you're talking about, melissa. i mean, the reality is copper should have been soaring today after 16-month highs on the china pmi. that's every reason people were buying copper up until today. today was maybe the best evidence out of china that supposedly things are still alive. awe bought isn't some of that already built in. you had ubs upgrading the commodity space as well. and they were talking about coke and coal, talked about copper, they talked about iron ore. oih is at one of those names, though, got up to 110, failed, now it's pulling back, getting closer and closer to 100. it's at 103. i think that could be a great entry point when you look at the engineering names. we talked about how this is a trader's market, you don't need to chase. look at something like fluor. that stock was absolutely enfego. now it's pulling back. if it gets to 50 it gets attractive based on the kinds of earnings power they talked about. >> joy's out earnings. >> joy global out tomorrow.
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you could expect, looking for 95 cents, they blew the number away last quarter. if they're right about what's going on in china and you look at what's going on with copper, this right now could be a very very cheap entry point. it's been kind of hovering near the $40 level for a while. that and bucyrus at 30 both seem to be cheap. >> carter worth a week ago said i'm may sit around $7. it's sitting there. kudos to him for nailing that one. >> mosaic, pete probably seeing this in the option pits, a lot of call activity in the 60s for a stock that traded 49. there's been rumors it started back in july. this is out of brazil that volleyed the big iron ore producer is getting to look into the game. >> the company, at least the cargo, which is a 64% owner of mosaic, had said as late as august 18th that it is exploring its options. >> sure. and they didn't comment today. they were asked but the reality is these two companies, bhp and
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vale want to be in this space, mosaic looks very interesting. >> the september 16th calls were incredibly active, traded over 47,000 -- >> that's 25% higher than today's close by september -- >> but how do you guys know when you see the heavy call activity -- >> you just end up participating because sooner or later you think something is going to happen but you've got to be disciplined. i mean, that's where you have to understand volatility. that's where you can use spreads sow you don't have the same type of exposure to just a naked call where you really could be hung out to dry. but i'll tell you what, there are serial names to your point that come up almost every cull of months that are going to be takeovers. this is not one of them. this has just begun over the last quarter or so with the big run-up. >> let's move on to the next trade and talk about the sell-off. september starting off with the sell-off on the back of positive news on the economic front. were we indeed overvalued after the summer rally? joining us on the fast line is david rosenberg, chief economist and strategist at gluskin scheff. i know from your note yesterday you believe the market is overvalued.
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how much farther do we have to fall in order for stocks to be fairly priced? >> right now based on the research that we did the s&p 500 up until a week ago was priced for about 4% gdp growth for the coming year. which, you know, obviously isn't impossible but i wouldn't give much more than 10% or 20% chance of happening. i'd be more comfortable with 2% growth which is what the corporate bond market is discounting right now. if we're talking about going to a level where the stock market corrects consistent with a 2% growth-f you're talking about 840, 850, which if you're a type of analyst is about a 50% retracement, which makes perfect sense to me, and i think that would be a good time to reevaluate whether it would be a good time to jump back in.
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>> hey, david, is there any sector right now that has not participated that's not overvalued in your opinion in the market? >> well, i think right now the operative word is with expectations after this cash for clunkers probably going to come down, i'd be more inclined to be playing the consumer staples and health care and the utilities. i think all the stuff that underperformed in that dramatic 50% rally, if you believe there's going to be a direction, the stuff that underperformed is probably going to outperform in the next several months. >> david, on the manufacturing side we got some mixed data. the automakers obviously a clunker-fueled 15 million annual sales target. we think that's going to go down to 10. but they did tell us their inventories are at 30-year lows. shouldn't that give us some industrial push into the fourth quarter? you may think it's one off. i'm not sure i do. but what's your thought on that?
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>> well, look, i think that before the cash for clunkers we were looking at auto sales 8, 9 million, and i think some of the weekly surveys suggest that we've actually gone back there. so this is just something that influenced the quarterly pattern of spending. not much different when we had 0% financing back in late 2001. my god, that was the last time we saw 21 million in auto sales. you know, and the ism index, if you do the analysis, you'll see that the number is real. no one's going to say the number isn't real. and it was actually a good number. but it was already priced in. you know, you're not talking about a 50-plus ism number with the s&p at 750. we crossed the 1,000 mark. we had a lot priced in -- >> david, you're calling for 840 in the s&p. i'm just curious, how quick do you think we can get there? >> well, you know, mr. market can move pretty quickly. >> yeah, i know. >> we're in this seasonally weak period of the year. it could happen by october. but my sense is if it's like 2002 it ain't going to be slow, it's going to be pretty swift. >> wow, as early as october october. david, thank you very much for your time and your commentary, dour as it is. that was the word on the street.
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coming up we continue our bears on parade. neural roubini, peter schiff. we've got the doomsayers warning you about the sell-off like we saw today. all that and much more coming up. >> roubini, schiff, back to back. it's the two biggest, baddest bears on the street. and they give us their exclusive outlooks on a market that could be in for a mauling. and a sneaky mobile play that could have "fast money" written all over it. from messaging to enterprise mobile, the ceo delivers the goods on what's next for wireless. plus, lessons from lehman. the "fast" traders tell us what they learned and how they're using it now. when america's post-market show continues. (announcer) if you think all batteries are the same, consider this:
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save up to thousands of dollars... on potential out-of-pocket expenses... with an aarp medicare supplement insurance plan... insured by united healthcare insurance company. call now for your free information kit... and medicare guide and find out... how you could start saving. welcome back to "fast money." we're live at the nasdaq marketsite in new york's times square. wells fargo selling off sharply midday. put activity exploding on the news of a secondary offering. the company saying it would pay the tarp money back soon without having to raise additional equity. for more on the story let's go to paul miller, a top-ranked analyst at fbr. paul, a pleasure to have you back on the show.
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first of all, can wells fargo in fact -- does it have the capital? does it have the earnings power in order to earn its way and pay back the tarp without a secondary? >> only if the government lets it do it. they don't have the capital right now to pay back tarp, but they do have a lot of earnings power. so if the government's going to get forbearance relative to the capital ratios they set up six months ago to pay back tarp, yes, they can. but you know, when you look on the paper, if they have 4 1/2% tier one common equityish we don't know how they're going to be able to pay back tarp without getting some forbearance by the government. but the government can do what it wants, but wells does have great earnings power. so maybe they're going to get a break on this. but on paper it's very tough for us to sit there and see how they're going to pay back tarp anytime soon without raising capital. >> have you made a call in to wells fargo? have you talked about these predictions and whether or not they've already talked to the government about any sort of forbearance they might get? because that sounds like a huge wild card at this point. >> it is a huge wild card. we have not talked to wells fargo. wells fargo has kept somewhat mum on all this stuff. it really came out today, this is the first time we heard
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they're going to pay back tarp soon and not raise capital. we felt that wells fargo would not raise capital because they feel they have plenty of earnings power to earn through this crisis. so we never felt they were going to raise capital, but we did think it's going to take a little longer for them to pay back tarp. so we need to see the particulars if they can pay back tarp, has the government given wells fargo a break, a bigger break than they've given other companies in this crisis? >> but if paul, i'm skeptical on why today, the timing on that announcement. on a day when there's all kinds of speculation in the banking sector about people who could and could not do whatever. >> i don't know why today. he was on a bloomberg interview, i believe, and i think this just came out. i think he was asked that question because it was all in the stock at the point. but there's been rumors about these guys raising capital for the last six months, and they just now have done it. they raised less capital under scap than any other bank out there, and they have lower capital ratios than any other scap bank out there, scap being the banks under the government stress tests, of course. so wells is always somewhat
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confusing to me. we've gotten wells wrong relatively speaking over the last six months. stock hs a nice run, it's one of the richest stocks out there. a lot of earnings power, great deposit franchise out there. if any company was going to get a break, it would be wells. but given where their capital ratios are relative to their peers like a jpmorgan, like a b of a, on paper it doesn't look like it can give back tarp unless the government's really going to cut them a break. >> well, paul, i understand where the yield curve sets up for them, but where's this earnings power coming from at least in the next six months? maybe a couple years from now i get it. but in the next six months where it's coming? >> their deposit base. wells has one of the best deposit bases out there. their cost of funding relative to the deposit is almost 50 to 100 basis points better than almost everybody else in the market. that's where it's coming from. but is it enough? when you look on the paper, you're right, is it enough to overcome those low capital ratios? we don't think it is. hoifr, wells -- however, wells
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fargo, he was here, he would are gou that, yes they are, you that can't hold us to those low capital standards. but it all goes back to when they're saying something like this you can't take it lightly, there must be something in the works or i don't think they'd come out and make this bold statement. but when you say soon, i don't know, six months, a year. that's a big question. >> hey, all paul, given the quick run it's had and the fact the stock's up near the high end, is it negative if they come up with a secondary? just real quick -- is that a negative. would you view it negatively? >> no, i would not view it negatively. i like any of these companies raising capital. i think in the short term it might dilute the capital-u might see a trade down a bit but i think investors like for these companies to be capitalized coming out of this cross. i think the market would accept it and take all the shares wells would give them. >> paul, i have a quick question before we let you go. let's say wells is able to earn exactly what you're predicting it to earn. how much -- can you give us an idea of how much government forbearance there needs to be in order for wells to pay back that capital-db in say, a year? >> back of the envelope, 20 to 25 billion dollars. almost $8 per share. >> wow. paul miller, thank you very much for your time. >> interesting. >> yeah, interesting.
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what would you do with wells fargo stock at this point? anybody buy it now that -- >> i really believe where there's smoke there's fire. i believe mr. stump believes what he's saying, but i also believe at some point you have to do something. i think a secondary's probably in the works at some point. i think the stock moves down. >> i think there's no way they can do a secondary. i don't think he has to come out and say what he said today. therefore i think it would be a big surprise. i do think there's pressure on their earnings power to repay the tarp as soon as possible. and i do think they're in the back of the pack. from a fiscal perspective and earnings profile they want to pay it back but they have to point -- >> call it a simplistic approach but why buy wells fargo when you could buy jpmorgan? that's the way i look at it. >> let's move on here, time for "bull market or b.s." if the correction is really on the horizon where can you hang out for profits? peter schiff, president of europe pacific capital, author of bull moves in bear markets joins us now. always a pleasure to speak with you. today's sell-off, this is the beginning of a big correction we were expecting to happen?
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>> well, you know, the correction was the rally. the question is has the bear market resumed or are we still going to correct and move higher? you never know that in advance. it's certainly possible. but either way i wouldn't want any part of the u.s. stock market or the u.s. bond market. nobody's going to make any real money here. if they want to protect their wealth, if they want a profit, they've got to get out of the u.s., invest abroad -- >> where? >> well, i like asia in particular. i think there's a lot of economic growth going on in the asian economies. you just had the election in japan. there's a good chance the new japanese government is going to move away from the policy of massive subsidies to the u.s. economy. they're not going to keep interest rates at zero. they're not going to maintain the value of the dollar. so i think you're going to see the asian world moving away from the business of subsidizing the american economy, and that's going to be to their benefit. >> i agree with you, peter, although i would say isn't the concern out of china right now that they have subsidize? i mean, bank lending's coming
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down. it came down in july. it's coming down in july. it looks like we've seen some stimulus that is not sustainable to -- really get this economy. >> look, i'm a big bull on asia with you. i'm trying to strike a colored -- a cord to see if you don't believe can get stimulus here that works why do you think it will work there? >> well, no, i don't think the stimulus is working. i think they'd be better off without it. but the main difference is they can afford their stimulus. they have their own money. i think there would be a better stimulus if they let the r & b appreciate. we don't have any money. we have to borrow our stimulus money from japan and from china. they have a lot of savings, we have none. >> you look at asia right now and i understand you want to be in asia and not in the u.s., though. asian demand, asian strength translates into domestically here technology sector performing very well. the resource sector as well performing well. you would have to see a big breakdown in correlations for our democracy markets not to move higher if technology and the resource names do so.
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>> i'm not saying the tech names or the resource names can't outperform the overall market.t. but i think in general we have a lot of headwinds here and i think our market is expensive. i mean, you can find technology stocks trading in asia that have much lower multiples and much better growth rates than the ones in the united states. the same thing applies for natural resource companies whether they're in australia, norway, canada, i think you still get better buys abroad. but certainly i would rather own types of stocks in the united states than the financials or retailers or government bonds. >> but peter, then what's wrong with a joy global that has that exposure going right over into china? or what's wrong with some of the tech names that go directly over there where we actually see the books for ourselves and we don't think there's any funny business going on with the balance sheet. >> i'm not saying you can't buy the stocks. i'm just saying the valuations are higher here pup get more bang for the buck going abroad. and i'm also afraid of what's going to happen in this economy. remember, the real economic crisis is in front of us, not
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behind us. and i don't know what kind of draconian taxes are going to be imposed on whatever companies are making profit. we can have windfall profits on these companies. i'm afraid what this government might do to undermine the profitability of our companies. so i want to stay away from it. i want to get out of dodge. >> peter, thanks very much for your time. peter schiff, of european pacific. the specter of the u.s. government pushes another investor away. >> getting out of dodge is a very smart invest move but i think there are some arguments we're making on the desk which is first of all there are plenty of u.s. companies that have heavy exposure to the things he's talking about. >> and let me say the greatest economic crisis is ahead of us as we sit on the anniversary of what occurred last september. >> that is frightening. >> that is frightening. and not necessarily something i believe. speaking of the bears let's recap the poll of the day because apparently -- last night's poll of the day, that because there were a lot of bears amongst you. we asked where the s&p would end in september. 44% said lower, 22% much lower.
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near 7% said much higher.. nobody apparently agreed with guy, who voted e. >> much, much lower. >> much, much, much lower. coming up next, bears on parade continues with "fast money's" exclusive sound bites were famed doomsayer neural roubini. plus, might as well as call it drops. today, why american express, nokia, and e trade some of the biggest losers in today's sell-off. ♪ well i war a new car, ♪ ♪ which one's me - a cool convertible or an suv? ♪ ♪ too bad i didn't know my credit was whack ♪ ♪ 'cause now i'm driving off the lot in a used sub-compact. ♪ ♪ f-r-e-e, that spells free credit report dot com, baby. ♪ ♪ saw their ads on my tv ♪ thought about going but was too lazy ♪ ♪ now instead of looking fly and rollin' phat ♪ ♪ my legs are sticking to the vinyl ♪ ♪ and my posse's getting laughed at. ♪ ♪ f-r-e-e, that spells free- credit report dot com, baby. ♪
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welcome back to "fast money." here's what we've got coming up for you in the second half of the show. today's big sell-off felt eerily familiar to the sell-offs that dominated last september. we're looking back to get some lessons from lehman brothers. plus, a hidden trade in one sector topping the tape today. and that is smartphones. and just moments away, a special sell-off edition of "pops and drops." or "drops and drops." >> that's kind of grim. the sell-off edition. there's usually a pop or two in there. >> i've got a pop. >> you'll have to tune in to find out what the pops are. back to our bears on parade, nyu economist neural roubini has doubted the summer rally from the start, contending that a double dip recession is likely.
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today's sudden sell-off driven by bank stocks would seem to support that thesis. professor roubini spoke exclusively to "fast money" today. he thinks bank balance sheets are still the biggest threat to the recovery. >> the debt ratios of banks and houses still very high, and the houses have barely started selling. instead what we've done has been to socialize these private losses and now we have a massive releveraging of the public sector with large and unsustainable budget deficits leading to an accumulation of public debt, over the next ten years. and these budget deficits and their accumulation of debt may be the problem and may lead to another crisis. >> what do you guys think? the fact of the matter is when you take a look at the markets we're back to close to prelehman brothers level. so it seems like we're looking through all of this. however valid these comments are. the markets are looking through it. >> well, i still think you're going to see bank failures going forward. a lot of people talking about that now. i think that will spook a lot of folks. whether they're too small or whatever, it's not a big deal.
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i think the fact that banks will fail going forward, it's going to spook the market. i happen to agree with a lot of people that spoke today. i think the market has seen its high for a while and i think we're headed lower. i don't think we're going to zero, but i think we can trade down to 850 at some point. >> and the trade off this is a forgotten trade, if professor roubini is correct. you've got to be long gold. >> long gold. >> long gold. >> just to hide out. >> long gold. >> but what's interesting also about today's china. pmi numbers is there was inflation in those numbers and if china's going to slow down what they're doing it's because there's inflation and that would be a big problem. if you start to see any signs of inflation, especially in these emerging economies, be careful because they're going to take the stimulus right now. >> in fact, we did ask professor roubini just that question. we asked if demand from china would offset continuing problems here at home. listen to what he had to say. >> i don't believe that china could be the main locomotive of global growth. the chinese gdp is only 3 trillion. the one of the u.s. is 15 trillion. chinese total consumption is 1 trillion. u.s. consumption is 10 trillion.
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so china is too small to be the main locomotive of engine of global growth. and there are even excesses right now in china like fraud in the real estate, in the stock market, and there is now the beginning of a correction. and there was a very sharp slowdown of growth in china, that's going to be, again, negative for the global economy. >> china is not big enough to be the global locomotive of growth. >> well, i agree with that. i mean, it's a $4 trillion economy if you're stretching it. even if you want to then bring in -- the other people that are doing very well like india and brazil. you know, you've got about 7 or 8 trillion. the u.s. is a $14 trillion economy. that alone cannot do it. again, their demand side of their pmi didn't show that it's actually organically growing. just producing more. that's not necessarily what you want to see, even though this has been a very positive event and i do think we shouldn't p pooh-pooh what's going on in china and i think we shouldn't underestimate the strength of these growing markets. >> but china doesn't have to be the locomotive.
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we just want a little help along the way. we just want a push. we'll take a little push from china, brazil, a little something from india, and then throw in russia or something. i tell you what, we still are the global leader but doesn't hurt to -- >> can we actually call ourselves the global -- one year ago lehman brothers fell and we suddenly learned we're not the global leader. we took down everybody else and when we were coming out of this we depend on everyone else and their stimulus -- >> and there's no doubt we have to have some help along the way but i still think we are the leader of the group. >> and don't forget what china did in the first quarter of this year. they were the economic global stabilizing force, and that's all we need them to do as you work your way through 2010. if they do that, we're fine. >> and if germany and japan which are the second and third largest economies in the world were actually growing, we'd be kind of excited right now. well, if you add those economies up, they actually equal what we just talked about with brazil, india, and china. it is a global economy. that's the good news and the bad news. that's the reason why everybody sold off together. but if you've got 25% of the world that's doing very well,
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not just sustainable growth, and then you've got a bunch of countries on the fringe even of that, it's not a -- it a not a basket case. >> and germany's sentiment just continues to go higher and higher and higher. >> let's move on. time for today's edition, the sell-off edition of "pops and drops." or "drops and drops" today. a drop here for the s&p home builders etf, down 3%. guy. >> we said it yesterday. this thing has a lot farther to fall. it's had a huge run, and i think the next 10% to 15% is lower. >> mosaic was up. this is one pop here -- >> you've got a weak dollar, you've got a terrible market, yet this stock is up, an unusual amount of option activity, calls versus puts just off the charts. interesting one to keep an eye on. >> drop here for allied irish bank, dropping 12%. >> we probably put this under taking out the trash if this was over here. the government stopping lending
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to a number of these banks. it's a very big problem for this bank. >> drop here for e-trade, down 15% today. joe. >> huge volume the last couple trades. listen, i don't like this stock. i think a better play is td ameritrade or schwab. it is $1.50 stock. not something you should play with here. >> guy, you buying nambag? >> all the time. >> up today 2%. >> it was all me. actually, i had nothing to do with it. bank of america merrill lynch upgrade the stock. bank of america playing a little stock market here. but the valuations are fair. coach is a lot better in terms of fair valuation than a lot of other guys but i still wouldn't buy any of them. >> he does have a man purse. it's a way of saying yes. >> i'm man enough to say i have a man purse. >> and it's pink. >> it is pink. >> they got a little boost last week on durable goods. they got another boost today and an upgrade from morgan stanley, putting a price target of 25. stock 15. big boost today. got a little bit of a pop. unusual options last week. >> nokia notches a drop today. >> credit suisse downgrade talking about what we've been saying. they're getting erosion in their market share in the smartphone space even though they're still 35%. i don't think that's the reason to throw the stock out the
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window. it has been. >> axp is a drop. 5% on the name. joe. >> the surprise of the year in the dow industrials average. clearly the leader. 30 which was once resistance. now becomes your support. you need to be a buyer of the stock there. >> and we've got a pop for mr. bernard madoff's montauk home. in an effort to return some of the losses of the victims of madoff's long island estate have been put up for sale along with everything in it. the montauk beachfront property is valued at around $8 million. boasts, four bedrooms, three baths, and a pool overlooking the ocean. >> you know what they call montauk? >> what? >> the end. that's the end for you, bernie. i hope you're watching. >> wow. >> all right, up next. >> go get him. >> did today's triple-digit sell-off remind you of last september's market bloodbath. you weren't the only one. before you get caught in another maelstrom, make sure you remember your lessons from lehman. that's coming up.
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welcome back to "fast money." we're live at the nasdaq marketsite in new york city's times square. well, today's dramatic sell-off gave some traders flashbacks to one year ago, when lehman brothers collapsed and the market followed. as investors feared the beginning of another september swoon, on "fast money" we are
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trying to learn from the past and draw some lessons from lehman, starting first with a look at those that saw it coming. ♪ is anybody out there >> reporter: one year ago this month, wall street's worst nightmare came to light in the form of lehman brothers. the storied brokerage house that survived the great depression imploded in epic fashion. but lehman was the culmination of a destruction sown years ago by the seeds of risky subprime lending. only a few were able to see it coming, and no one made more money betting against it than john paulson. the new york hedge fund manager figured out a way to align his money against the complicated securities linked to an inflating housing market. while investment banks such as lehman were bidding those very same instruments higher, the house of lehman came tumbling down and paulson took home $3.7 billion, landing him on the "forbes" billionaires list.
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but in a twist of fate, only a trader can understand, paulson is now buying stakes in the very wall street names that were brought to their knees under the weight of his 2008 winning trade. he saw it coming once before. is he one step ahead of the curve yet again? just a few days ago we were actually calling paulson sort of the next whale to watch, the one that everybody's watching on the street, because he is in there in the markets unlike, say, warren buffett who gets all these sort of preferred offerings. so are we listening to paulson when he's investing in these banks? >> yeah, i think we are. and i think a lot of people were very intrigued that in the second quarter his holdings long a number of these names that he was actually short on the way down was very impressive. now, where he is right now i don't think any of us know and i think that's one of the things we pointed out with the 13f you cannot know what he's doing in realtime. one thing i bet he is still in is gold. that's the trade that for him part of this apocalyptic scenario whether the one we had in reverse or one we may have due to inflation and a lack of real credit system if we start to question the credit quality
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of even the u.s. treasury. buying gold is what he's done. gld one of the biggest holders. also holding south african miners gfi. that's a place to trade. a trade we believe in. we believe in gold long term. >> the goldman sachs position there you're going to best in breed, next down to bank of america, a stock he did hate but he put a huge position on in there. we don't know exactly the levels but a lot of people have been talking over the last month and a half, two months about this stock, the potential earnings going forward. 2010 some of the projections very strong. it was morgan stanley talked about $2 a share. so if they can get a 2 eps that's going to be a big number, puts the stock well above 20. >> joe, you're long gold. >> i'm long gold. absolutely. >> just like paulson. >> we're going to wait, though, we're going to talk about that. "fast message." >> speaking of, time for some of your fast messages. we actually have a message from michael in san jose who asks guy, "now that the selling has begun is there a key level i should be watching on the s&p to indicate further selling to the down side?" >> hello, mikey. yeah, i think 970 is your level. a lot of people talking 979. i think 970 is your bogey, close
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below 970, get you 905. >> we won't talk about it. we're out of time. but joe is long gold. all right. coming up next, it is no household name like apple, palm, or blackberry, but coming up we've got the ceo of a company that makes those gadgets go. it's the hidden mobile phone trade you've got to have on your radar. we'll tell you what it is right after this. i'm here on this tiny little plane, and guess what...
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welcome back to "fast money" live at the nasdaq marketsite in times square. time now for a sector trade. few pockets of the market were spared in today's sell-off. but the resilient sector was smartphones. palm and rim remarkably closing higher on the session. they are not the only ways, though, to play this trade. sybase is a company that makes the software backbone for these must-have gadgets. chairman and ceo john chen joins us from silicon valley. mr. chen, great to have you with us. >> thank you, melissa. nice to be here. >> how closely do your sales track, let's say, the growth in smartphones? when we hear about rim and palm and apple selling more and more smartphones and the projections are so rosy, how much can we expect from you in terms of growth? >> we are, like you pointed out, we're the backbones in the so-called middle of connecting these devices together. the devices are not designed by each of the vendors to talk to each other, so we kind of do that job for them. so there is some correlation,
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but ours more lightly tied to the application that runs on these devices. >> so for an investor out there, how -- what should they look at? what metric should they look at when they're hearing about smartphones, et cetera? is there any sort of metric in there that tightly correlates to what you do? >> well, i mean, the basic thing is the more of these devices being deployed by businesses, the better off our company's going to be. the more different major camps there are, the better off that we're going to be as a company. and the more types of applications that you hear that actually run on the devices beyond just e-mail or people approving purchase requisitions or looking up for loyalty props and so forth, the more of these happening, the better off we're going to be. the latest thing is mobile commerce. and people are using these devices to pay for things they buy. and they pay bills and they pay each other. when these things happen in a more pervasive way around the
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world, it does make our business much stronger. >> mr. chen, you've been very aggressive on the m&a front over the years. recently, though, you've been buying back stock. is that something you continue to do? or do you see something out there that might be attractive to you folks? >> we generate a lot of cash from our business. so we don't want to just sit on idle cash. so when we have acquisition that we believe help our mission and push our strategy forward, we do that. and if we find out that we're in a low cycle and we don't want to just jump into anything that moves, then we pay back the investor through buyback. >> mr. chen, always a pleasure to speak with you. thanks so much for your time. we appreciate it. >> thank you. >> john chen, the chairman and ceo of sybase. any buyers of this, nice run so far this year. lots of cash as he pointed out. >> the balance sheet's great. it had trouble at $36 last august, had trouble again at $36 a couple weeks ago, now trading
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34 1/2. they get knocked down, but their valuations are fair and it's a well-run company. i tell you what, this is an interesting acquisition. target, forget about them going out and buying, folks. >> and on a lousy day you also got to see that palm and rim showed that this is tomorrow's utility play for people that have to buy these phones so, sybase will be right in the game. >> final trade, up next. ♪ yes, you're lovely... ♪ what do you think? hey, why don't we use our points from chase sapphire and take a break? we can't. sure, we can. the points don't expire... ♪ there is nothing for me... ♪ there's no travel restrictions... we could leave tomorrow. we can't use them for a vacation. you can use the points for just about anything. i know... ♪ the way you look tonight ♪ chase what matters. get your new chase sapphire card at
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poll action. poll of the day time. tonight's question is bank
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shares near 11-month highs. is it time to buy or bail out? a is buy. b, bail out. log on to right now, tell us what you think. all right. before we get to the final trade, quick programming note here. tonight on "the kudlow report" do not miss an exclusive with the fdic chairwoman sheila bair tonight 7:00 p.m. eastern time on cnbc. final trade tim. >> catch your breath stay short. >> j. crew stay short. >> mosaic, keep an eye on her. >> see you tomorrow 12:45 for the halftime report, and back tomorrow at 5:00 for more "fast money" on cnbc, first in business worldwide. tomorrow, come on down. the negotiator shows you how to get in and out when the price is right. and here's to your portfolio. why the booze business could bring a new high. "fast money" tomorrow on cnbc. first in business worldwide. wp on healthy hair?
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sexy. black, blue, skinny, flared, low and lower. there's nothing that fits like a pair of jeans, nothing that wears like them, nothing as comfortable or as versatile.
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that's why the jean business has become a $14.6 billion a year industry. all this is because of this, levis, the company that created jeans. welcome to "american originals." i'm carl quintanilla. it's the one fashion absolute. blue jeans are uniquely american and blue jeans are big business. there are more than 1,000 brands on the market. some of the hippest styles can go for as much as $900. but what can be disappointing to a lot of jean manufacturers is, like kleenex and tissue, coke and cola, there is one company whose name has become the universal trademark of jeans. it's levis.


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